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you might have a test of whether the Commission itself can make law. I do not know of any case where that has arisen.
Mr. LEA. Assuming there is no dispute about the facts in that case, would not the appellate court be free to make its decision, and they would not have to vary with the facts found by the Commission, but they would vary as to the legal conclusions, and in that case the courts would protect you?
Mr. DIGGES. That is correct.
Mr. Digges, the committee is very grateful to you for your testimony, and we have just been summoned by a quorum call over to the House, and we thank you very much.
The committee will be adjourned until 2 o'clock this afternoon.
(Whereupon, at 12:10 p. m., the hearing was recessed until 2 p. m., of the same day.)
The committee reassembled in room 1334, New House Office Building, at 2 p. m., pursuant to the taking of a recess, Hon. Joseph P. O'Hara presiding.
Mr. O'HARA. The committee will to order. The next witness will be Mr. Henry B. King, secretary of the United States Trade Mark Association, New York, N. Y.
STATEMENT OF HENRY B. KING, SECRETARY, UNITED STATES
TRADE MARK ASSOCIATION, NEW YORK, N. Y. Mr. KING. Mr. Chairman, my name is Henry B. King. I am the secretary of the United States Trade Mark Association, New York City, and I appeared here today as a representative of that organization.
The United States Trade Mark Association was founded 70 years ago in 1878 and is incorporated under the laws of the State of New York as a nonprofit organization. The association seeks to promote the rights of the public. Members of the association and trade-mark owners generally in the use of trade-marks and trade names and to give aid and encouragement to all efforts for the advancement and observance of the trade-mark system.
The association is composed of 160 American manufacturing companies, some large, some small, some medium-sized, who are owners of trade-marks and who employ the media of national advertising in merchandising their goods.
The O'Hara bill, H. R. 3871, has been the subject of considerable study by our lawyers' advisory committee and the board of directors. For
your information, the lawyers' advisory committee is composed of 22 prominent trade-mark attorneys who are recognized in their profession as authorities in this field of law. The committee devotes its services to the association freely and without compensation of any kind.
The lawyers' advisory committee approved the O'Hara bill in principle and recommended it to the board of directors. In October 1947, the board of directors conducted a poll of the members of the association to learn their views on this proposed legislation. The members were almost unanimous in support of the principles of H. R. 3871. Over 95 percent of the members expressed no doubt as to the necessity for such legislation. On April 21, just 1 week ago, our lawyers' advisory committee affirmed its position in support of H. R. 3781. The board of directors at the seventh annual meeting of the association on April 23 went on record in support of H. R. 3871 and it is at their request that I appear here to testify in favor of the bill.
The trade-marks of any business are its most valuable assets. Just a few days ago I was talking to an officer of one of our member companies. His firm has been in business for over 50 years and the trademarked products they produce have come to be accepted by the public as reliable and dependable. He told me that their trade-marks were their most valuable assets-more important than the plants, more important than the machinery that produced the products. Were a fire to destroy the plant, were a flood to ruin the machinery, the company could commence again because of their reputation. Their reputation is symbolized by their trade-marks. Their trade-marks are their franchise to the public. Were they to lose the use of their trade-marks by the action of a Government agency they would not be able to continue in business.
Because trade-marks are so important to American business and because the Federal Trade Commission has been taking an increasing interest in restricting the use of trade-marks, the United States Trade Mark Association has concerned itself with H. R. 3871.
In recent years a substantial number of the more important cases brought by the Federal Trade Commission have sought to prevent or restrict the use of well-known trade-marks in use for long periods of time.
Briefly, let me call to your attention a few of these cases. There was the well-known Canadian Act case in which the Commission in 1943 held that the use of the words “Canadian Act” was a deceptive mark for bottled ale-even if the label stated that the product was "Made in U.S.A.” Four years prior to that time, the mark had been approved by the Alcohol Tax Unit and the company had expended about 750,000 dollars in advertising the trade-mark. Three years later, in 1946, the Commission decided to reopen the case, reversed itself, and approved the use of the mark.
Another case involved the trade-mark “Alpacuna." The Federal Trade Commission held that the public could be deceived into thinking that Alpacuna coats contained hair of the vicuna, a very rare animal native to the mountains of Peru. The Commission reached this decision in spite of the fact that Alpacuna coats sold for $40 while vicuna coats were sold in the neighborhood of $900. As a result, the use of the trade-mark was prohibited, and the Jacob-Siegel Co., owners of the mark, lost a valuable and well-known trade-mark after 14 years of use. Later the Commission modified its order after the Supreme Court suggested that a somewhat milder remedy would be in order.
The Commission has also sought to require that a seller give a generic name the same prominence with his trade-mark in labeling and advertising. In the Celanese case, the Commission insisted that the word "rayon" must always accompany the mark, even though the corporation maintains its product is not rayon.
In the Pompeian Olive Oil case, the Commission issued a complaint seeking to prohibit the use of that mark for olive oil clearly labeled as a domestic product. The Commission based its argument on the ground that the same name had been used in prewar days for imported oil, which was not available in this country at the time the complaint was issued.
There are many other recent cases in which the Commission has either prohibited or sought to prohibit certain trade-marks, such as in the A. P. W. case, the cases involving the use of "elasti-glass” for men's accessories, the use of "favorite of the stars” for cosmetics, "olive-ollo” for soap containing olive oil and other ingredients and "Hudseal” for rabbit furs.
It is with these types of cases that the United States Trade Mark Association is concerned.
Let me say at this time that our association is very much aware of the good work accomplished by the Commission and of the deep sense of public duty that its personnel hold. Nevertheless, we believe as a matter of principle that the Commission should be required to try its cases before an impartial court so as to put a stop to the multiple functions of the Commission as investigator, prosecutor, judge, and jury in its own cause.
This is the fundamental purpose of the O'Hara bill and it is for this reason that we support it.
Most Federal Trade Commission cases deal with misbranding, false advertising, deceptive trade-marks, and disparagement of competitors. These are the same types of cases being constantly dealt with by the district courts.
The Commission, unlike the courts, is presently forced to prejudge its case, for no proceeding can be started unless in the view of the Commission the law is being violated.
Under the Commission's procedure, trial of its cases is held before a trial examiner, who alone sees the witnesses and listens to the arguments. The trial examiner then presents his recommendations which are advisory only.
It is the five Federal Trade Commissioners who, sitting as a court in Washington, decide the case. The Commissioners never see the
. witnesses and most certainly do not have the time to read the complete transcripts of the cases. They usually permit on the average about an hour for oral argument by their own attorney and defendant's counsel.
There is a substantial difference between the judicial procedure of the Commission and that of the courts. The Federal Trade Commission Act provides no standards for the type of evidence the trial examiner may admit, nor must the evidence admitted be of the character required by the courts.
The Commission may base its decisions on biased testimony, incompetent evidence, and hearsay. It may pick and choose between the contradictory evidence given by its own witnesses.
The Commission attorneys during trial are supplied with blank subpenas. The defendant's attorney must apply to the Commission in Washington or the examiner for such subpena, which may be denied.
Under its procedure, the Commission has the right to require the defendant to present his case before the Commission concludes its own.
The powers of the Commission are very broad. It has power under the act to prohibit "unfair or deceptive acts or practices in commerce." However, in sustaining charges, it need not prove that any of the public has actually been deceived or any competitor actually injured by practice in question.
The Commission is not barred from proceeding by lapse of time. Trade-marks registered for long years in the United States Patent Office have been held “deceptive” and ordered abandoned by the Commission. It is the purpose of the O'Hara bill to correct this present system by entrusting these cases to the courts.
The United States Trade Mark Association notes with approval the serious attempt by many in the Federal Trade Commission to revise the rules of procedure so as to offer the defendant a fuller opportunity for justice. We note also with approval that the Commission is bringing fewer trivial cases to trial.
Regardless of the reforms or the more reasonable attitude on the part of the Commission, we are here today in support of a principle of law which will insure justice.
Mr. O'HARA. The committee appreciates very much the statement which has been made by your association as presented by you.
Mr. King. Thank you, Mr. Chairman.
Mr. O'HARA. There are other witnesses in behalf of the bill whom we will be unable to hear at the present time. They will be heard at a hearing that will have to be arranged for.
The committee will adjourn to meet tomorrow morning at 10 o'clock when those in opposition to the bill will be heard.
(Thereupon, at 2:15 p. m., the committee adjourned, to meet at 10 a. m. the following morning, Thursday, April 29, 1948.)